2010: The Year Mobile Takes Off

6 03 2010

2010 is shaping up as the inflection point for mobile, particularly in North America.  Device sales are exploding with the Apple and Gooogle Android platforms showing the highest growth rates.  The challenge for the market as a whole will be the ability of the wireless networks to keep up with the sudden and utterly massive explosion in mobile IP traffic – this at a time when IP telephony threatens to finally kill off voice communications revenue streams for carriers.  See “Verizon to Allow Unlimited Skype”

For a detailed analysis of the mobile market  see the October 2009 Morgan Stanley report.

Mobile Usage Trends

  • Global Mobile IP traffic will grown by 66X from 2008-2013 according to Cisco.
  • AT&T says that they have seen 50X growth in mobile data traffic in three years, presumably due to their exclusive deal with Apple for iPhone support.
  • Smartphone user growth (Morgan Stanley):
    • IPhone is grown +153% to ~75 million users in 2013.
    • “Other Smartphone” is growing +123% to 750 million users in 2013.
  • It’s no surprise then that 3G networks in the US are being overwhelmed.  Carriers are trying to build out to keep up, but will have to include WiFi to provide usable service, particularly in major metropolitan areas.

Mobile Use of the Web

  • iPone and Android users browse the Internet more than anybody else
  • Google has seen 5x mobile search growth over last 2 years
  • 25% of iPhone and Android users spend nearly 90 minutes per day using applications on their devices.
  • Conclusion: Two big things are driving mobile use social media and mobile applications.

Monetizing Mobile

One of the big stories to follow this year will by how vendors monetize the mobile business, and that generally means mobile advertising.  The big players have made moves early with both Google and Apple acquiring mobile ad companies.

  • In November 2009, Google acquired AdMob for $750 million.  AdMob had been a big player on iPhone.  AdMob uses geographic information to target ads and also provides analytics.
  • Apple acquired Quattro Wireless a couple months later for $275 million.  The stated goal was to provide “engaging, relevant and useful” mobile advertising.

These moves put Google in a strong position in mobile advertisins: Google already leads in search base advertising and the addition of AdMob gives them strong offerings in Web Display ads and Application Based ads.

Apple’s strategy is less clear.  They have a dominant market position and a lot of momentum but are not currently a player in the advertising space, so we will have to see how they approach advertising on their platforms.  Up until now their business model has been to sell devices (iPhone, iTouch, iPad) and media (iTunes, Apps).

Google Wins Patent for Location Based Advertising

On March 1, 2010, Google won a patent for location-based advertising.  This is a broad patent that may give Google a significant competitive advantage in the space.  It could be used defensively, or could be applied offensively to keep other competitors out of the space.

  • Uses “at least geographic information” to target ads.  This suggests they can use geo and personal information together to provide relevance for advertising.
  • Sets minimum ad price bits
  • Allows modification of the ad

There is a lot going on at once here.  The big “wild card” for continued mobile market growth is the ability of the carriers to manage the sudden growth in traffic without causing market backlash.  One source of help will be to integrated with WiFi networks, particularly in heavily used metropolitan areas.

It’s going be very interesting to see how successful the various players are in monetizing their businesses.

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